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Hi there, i am getting a bit confused about the removal of dividends paid by S to P in the group SPL. I understand the need to remove it, but i have seen questions saying to remove all of it from investment income, and some saying to only remove P’s % Share from investment income. Is there a particular rule to this? i thought it may be only mid-year acquisitions that you deduct the P’s share of post-acquisition dividend paid, but maybe not.
Thank you!
Hi,
You will need to eliminate P’s share of S’s dividend always. The confusion could arise through several scenarios, one of which could be that the only amount recorded in P’s investment income is the dividend received from S, and therefore it would all be removed. But note that the amount would still be P’s share of S’s dividend as that is all that will have been received.
The other is where P may own 100% of S and therefore 100% of the dividend is removed, but this is still P’s% of the dividend paid being the 100%.
The other is where P owns other investments and will have received dividends from those investments and from the subsidiary. We still remove P’s share of S’s dividend but there would be remaining investment income being that received from the other investments.
It is a straight forward rule but sometimes its application can be more complicated than anticipated.
Thanks
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